After AbbVie's Humira: What Next?

| About: AbbVie Inc. (ABBV)

Several companies are working on biosimilars and AbbVie (NYSE:ABBV) itself is preparing a pill as a possible successor to the world's best-selling medicine. It may take some time, however, for any of this to reach the clinic.

Humira

AbbVie's Humira was the number one selling medicine worldwide in 2012 with sales of $9.265 billion. In the first quarter of this year, Humira had global sales of more than $2.2 billion, up 17%. Since the drug's approval in 2002, an estimated 370,000 patients have used Humira in the treatment of multiple immunological diseases, including rheumatoid arthritis (NYSE:RA), spondylitis, psoriasis, Crohn's disease and ulcerative colitis. The market for RA, psoriatic arthritis, and ankylosing spondylitis collectively make up one of the world's largest biopharma markets valued at $30 billion and growing.

However, in the next few years, Humira is due to lose patent protection in the U.S., Japan and the EU in 2016, 2017 and 2018, respectively. Humira does not come cheap: the annual cost of therapy reaches as high as $26,632 in the U.S.

Also, Humira is not without its flaws. Its safety profile is similar to those of other TNF (tumor necrosis factor) inhibitors, requiring vaccinations for pneumococcal disease and influenza in defense of immunosuppressive complications that RA biologics can provoke. Humira also carries a black box warning of an increased risk of cancer, tuberculosis, and other opportunistic infections. Humira's subcutaneous administration also means that injection-site infections are common.

AbbVie is ready for battle

AbbVie has a huge amount at stake in both the current legal dispute about trade secrets and from the threat of emerging biosimilars.

AbbVie has made it clear that it will defend each of the 200 patents covering the production of the drug. The company has sought an injunction to block the European Medicines Agency from releasing detailed data on the effects in individual patients in clinical trials. Acting on Freedom of Information requests, the European regulator has allowed access to 1.9 million pages of data filed by pharma companies as part of marketing authorization applications to date, but AbbVie and California-based InterMune (NASDAQ:ITMN) challenged the policy.

In early May, the European Medicines Agency has been ordered by the General Court of the European Union to stop releasing further documents until the dispute is resolved.

UCB, the Belgian drug company, was one of those seeking reports on AbbVie's Humira. The European Medicines Agency said the majority of freedom of information requests came not from independent researchers but drug companies, industry consultants and lawyers.

AbbVie said it supports "transparency of clinical research and safety information for the benefit of patients and healthcare professionals but not the disclosure of commercially confidential information that does not meaningfully contribute to the scientific review or evaluation of our products."

Biosimilars

Several companies are developing biosimilars for Humira to be ready for the patent expirations.

Boehringer Ingelheim's compound BI695501 has completed Phase 1 trial in New Zealand at the end of 2012, studying the biosimilar's safety and pharmacokinetics compared to Humira. Japanese companies Fujifilm and Kyowa Hakko Kirin has formed a 50-50 joint venture, Fujifilm Kyowa Kirin Biologics, which is developing a biosimilar version of Humira for rheumatoid arthritis. The venture is planning clinical trials in Europe in the first half of 2013. AET BioTech, a German and BioXpress, a privately-held Swiss company joined forces in developing a biosimilar based on BioExpress' technology and separately Amgen (NASDAQ:AMGN) is also active in a similar development.

FDA approval may not be easy to get. The applicant needs to show that the product is ''highly similar'' to the original and has no clinically meaningful differences in safety, purity, and potency. The biosimilar must also be a treatment for the same indication as the original and involve the same mechanism of action.

Galapagos

Galapagos' experimental pill, licensed by AbbVie, may become a successor to Humira.

In 2012, AbbVie (then still Abbott Labs (NYSE:ABT)) licensed the rights to GLPG0634, a selective JAK-1 (Janus kinase-1) inhibitor from Galapagos NV, a Belgian company. Under the terms of the agreement, Abbott has paid a fee of $150 million upfront and will pay another $200 million upon successful completion of the RA Phase 2 studies.

AbbVie will assume sole responsibility for Phase 3 trials. Galapagos would be eligible to receive additional milestone payments from Abbott, potentially amounting to $1.0 billion, in addition to tiered double-digit royalties on net sales upon commercialization. Galapagos retains co-promotion rights in Belgium, the Netherlands and Luxembourg. The stiff price paid underscores the significance attached to the new drug.

The deal gives AbbVie access to what may be the best in a "new wave" of pills against a disease that's now treated with injections.

JAKs are critical components of signaling mechanisms utilized by a number of cytokines and growth factors, including those that are elevated in rheumatoid arthritis patients. JAK inhibitors have shown long-term efficacy in rheumatoid arthritis studies with an early onset of action.

Recently it was announced that AbbVie will provide an additional $20 million to Galapagos to help extend the Phase 2b program of GLP0634 to 875 patients which will start in the second quarter of 2013. First data from the program are expected before the end of 2014 and if AbbVie decides to continue from there, GLPG0634 will also be developed in psoriasis, irritable bowel syndrome and lupus, mirroring the way Humira's label has been expanded.

In a 4-week Phase 2a clinical trial of GLPG0634 showed excellent safety profile: no serious adverse events and an absence of anemia and changes to LDL and liver enzymes, which are typical side-effects reported for other JAK inhibitors. The reason maybe that GLPG0634 targets JAK1, while others, for example Pfizer's (NYSE:PFE) Xeljanz is targeting JAK3.

Clinical improvements were seen in RA patients with once-daily dosages of 75-300mg, significant over placebo and the lower 30 mg dose. It also showed statistically significant improvements in ACR, which is an American College of Rheumatology score signifying a 20%, 50% or 70% or greater improvement in the number of swollen and tender joints.

Competition

To develop JAK inhibitors is very much in fashion among big pharma companies, including Pfizer, Eli Lilly (NYSE:LLY), Novartis (NYSE:NVS) and of course AbbVie.

Given the high price AbbVie has paid to Galapagos, it must have been a competitive bidding. The market for drugs against rheumatoid arthritis is dominated by injections such as Humira, Johnson & Johnson (NYSE:JNJ)'s Remicade and Amgen's Enbrel, which Pfizer shares. These block a protein called TNF, that's overproduced by patients with rheumatoid arthritis.

The recent CHMP's (Europe's Committee for Medicinal Products for Human Use) negative opinion on Pfizer's Xeljanz highlights the importance of having an established clinical presence in autoimmune diseases. CHMP has advised not to approve Xeljanz to treat rheumatoid arthritis.

Humira benefits from this kind of publicity and it should continue to grow with the market as biologics gain deeper penetration in autoimmune markets driven by more aggressive treatment strategies.

Investor's summary

In the first quarter of 2013, AbbVie's net earnings climbed to $968 million from $883 million in the previous year. Earnings per share grew to 60 cents from 56 cents. Adjusted earnings per share came to 68 cents. Total sales increased 3.7% to $4.3 billion. U.S. Humira sales grew 23.7% due to growth in dermatology and gastroenterology, as well as the global launch of the ulcerative colitis indication. Humira continues to offset the weakening of AbbVie's other franchises, such as the lipid and HIV products, as well as AndroGel.

Analysts forecast peak AbbVie revenues of $21 billion in 2017 as Humira, the Hep-C oral regimen, and Androgel offset declining sales of the cholesterol and HIV products.

AbbVie's marketing strength and reputation in immunology strongly support Humira's high status in the RA market, and Humira's first-line biologic status demands that new therapies prove superior results before they can take market share from Humira. Humira may even gain additional patient pool, if guidelines change to include biologic usage for early RA.

To answer the question in the title "what next?" briefly: Humira is not going away for some time, even after the patent expiry; the Galapagos drug has good chances to succeed; the biosimilars will have a tough time getting approved, especially in the U.S., and the Humira income should probably give AbbVie enough time and cash to develop its specialty-focused pipeline.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.